TELECONFERENCE FY 2014 FINANCIAL RESULTS

Transcription

1 TELECONFERENCE FY 2014 FINANCIAL RESULTS 10:00 CET, 17 February

2 DISCLAIMER Certain statements in this presentation constitute forward-looking statements. Forward-looking statements are statements (other than statements of historical fact) relating to future events and our anticipated or planned financial and operational performance. The words targets, believes, expects, aims, intends, plans, seeks, will, may, might, anticipates, would, could, should, continues, estimate or similar expressions or the negatives thereof, identify certain of these forward-looking statements. Other forward-looking statements can be identified in the context in which the statements are made. Forward-looking statements include, among other things, statements addressing matters such as our future results of operations; our financial condition; our working capital, cash flows and capital expenditures; and our business strategy, plans and objectives for future operations and events, including those relating to our ongoing operational and strategic reviews, expansion into new markets, future product launches, points of sale and production facilities; and Although we believe that the expectations reflected in these forward-looking statements are reasonable, such forwardlooking statements involve known and unknown risks, uncertainties and other important factors that could cause our actual results, performance or achievements or industry results, to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Such risks, uncertainties and other important factors include, among others: global and local economic conditions; changes in market trends and end-consumer preferences; fluctuations in the prices of raw materials, currency exchange rates, and interest rates; our plans or objectives for future operations or products, including our ability to introduce new jewellery and non-jewellery products; our ability to expand in existing and new markets and risks associated with doing business globally and, in particular, in emerging markets; competition from local, national and international companies in the United States, Australia, Germany, the United Kingdom and other markets in which we operate; the protection and strengthening of our intellectual property, including patents and trademarks; the future adequacy of our current warehousing, logistics and information technology operations; changes in Danish, E.U., Thai or other laws and regulation or any interpretation thereof, applicable to our business; increases to our effective tax rate or other harm to our business as a result of governmental review of our transfer pricing policies, conflicting taxation claims or changes in tax laws; and other factors referenced in this presentation. Should one or more of these risks or uncertainties materialize, or should any underlying assumptions prove to be incorrect, our actual financial condition, cash flows or results of operations could differ materially from that described herein as anticipated, believed, estimated or expected. We do not intend, and do not assume any obligation, to update any forward-looking statements contained herein, except as may be required by law or the rules of NASDAQ OMX Copenhagen. All subsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by the cautionary statements referred to above and contained elsewhere in this presentation. 2

3 AGENDA AGENDA Business highlights: headlines Key developments in FY 2014 Market development and sales-out in Q4 Performance of newly launched products Guidance 2015 Financial review for Recap and Q&A 3

4 HEADLINES SUMMARY Strongest quarter ever Revenue growth of 40.4% (35.2% in local currency) EBITDA growth of 52.6% Cash conversion of 169.3% + DKK 1 billion in revenue from concept stores Positive like-for-like sales-out growth in all core markets 4

5 FY 2014 SUMMARY Full year revenue was DKK 11,942 million, an increase of 32.5% or 32.7% in local currency compared to FY 2013, driven by all geographic regions, positively impacted by: Success of newly launched products all collections launched in 2014 improved compared to 2013 Strong development in revenue from Rings, which surpassed DKK 1 billion Network expansion across all geographies revenue from concept stores increased 51.4% and generated 56.4% of revenue compared to 49.4% in concept stores opened (net) to a total of 1,410 All four major markets experienced positive like-for-like growth in all four quarters driven by relevant products, targeted marketing efforts and improved in-store execution EBITDA increased by 49.0% to DKK 4,294 million compared to FY 2013 an EBITDA margin of 36.0% Including a gain of 4pp on gross margin driven by lower commodity prices Free cash flow was DKK 3,868 million vs. DKK 1,956 million in 2013 DKK 2.4 billion share buyback programme successfully executed 5

6 REGIONAL REVENUE DEVELOPMENT IN REVENUE BREAKDOWN BY GEOGRAPHY DKKm Q Growth Growth in local currency FY 2014 FY 2014 Growth Growth in local currency Americas 1,527 1, % 35.2% 4,959 4, % 20.6% US 1, % 20.0% 3,629 3, % 13.0% Other % 90.7% 1, % 46.1% Europe 1,841 1, % 30.8% 5,304 3, % 38.8% UK % 28.2% 1,654 1, % 36.1% Germany % 3.0% % 6.3% Other % 40.3% 3,072 2, % 48.9% Asia Pacific % 52.0% 1,679 1, % 58.1% Australia % 30.4% % 25.6% Other % 94.5% % 111.9% Total 3,961 2, % 35.2% 11,942 9, % 32.7% US increased 20.0% in local currency primarily driven by West Coast stores, as well as the new Disney products Other Americas increased 93.4% driven by Canada and the inclusion of Brazil (from Q1 2014) Continued strong development in most European markets in particular the UK, France, Italy and Russia Australia increased 30.4% in local currency primarily driven by strong ring sales Hong Kong, Malaysia, South Korea, Taiwan and China drive growth in Other Asia Pacific 6

7 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q SALES-OUT POSITIVE IN ALL MAJOR MARKETS LIKE-FOR-LIKE CONCEPT STORES SALES-OUT DEVELOPMENT (Y/Y GROWTH) 18% 15% 12% 9% 6% 3% 0% US 6.9% 5.1% 4.7% 40.0% 30.0% 20.0% 10.0% 0.0% -10.0% -20.0% UK 17.9% 20,6% 12.3% Eight consecutive quarters of positive like-for-like growth in all reported markets US sales-out growth high-single digit or more in all major regions except for the Northeast UK and Australia driven by strong in-store execution and products 40.0% 30.0% 20.0% 10.0% 0.0% -10.0% Australia 25.5% 10.1% 20.0% 20.0% 15.0% 10.0% 5.0% 0.0% Germany 4.9% 5.7% 2.3% Sales-out in Germany continues to be driven by good performance in PANDORA owned concept stores -20.0% -5.0% 7

8 PERFORMANCE OF NEWLY LAUNCHED PRODUCTS Christmas collection launched in the quarter and has been well received 41 Disney-themed products launched in November in 372 concept stores as well Disney theme parks initial feedback very encouraging More products to be launched in the Spring/Summer collections The PANDORA ESSENCE COLLECTION continues to perform well Products launched within the last 12 months continue to do well both in terms of sales-in and sales-out 8

9 DIVIDEND AND SHARE BUYBACK PROGRAMME DIVIDEND OF DKK 9 PER SHARE AND DKK 3,900m SHARE BUYBACK Board of Directors proposes to increase the dividend with 38% compared to 2013 to DKK 9 per share for 2014 Increase share buyback programme 63% compared to 2014 to up to DKK 3,900 million during 2015 The programme is being implemented under the Safe Harbour regulations (EC no. 2273/2003) Following the share buyback programme for 2014, the Board proposes cancellation of 5,818,651 shares equal to 4.5% of the total share capital Unchanged capital structure ratio target of 0 1x NIBD/EBITDA 9

10 2015 FINANCIAL EXPECTATIONS 2015 FINANCIAL EXPECTATIONS Revenue of more than DKK 14.0 billion EBITDA margin of approx. 37% CAPEX of approx. DKK 800 million Effective tax rate of approx. 20% During 2015, PANDORA expects to open more than 300 concept stores 10

11 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q REVENUE DEVELOPMENT IN REVENUE (DKKm) 68% 65% SHARE OF BRANDED REVENUE 73% 74% 78% 77% 2,822 Q % 40.4% 3,961 86% 86% 86% 84% 84% 82% 83% 81% 79% 79% 40.4% growth 35.2% growth in local currency Volume up 22.1% ASP DKK 145 (vs. DKK 126 in Q4 2013) SHARE OF REVENUE PER CHANNEL Share of rev. Concept stores 2, % Shop-in-shops % Gold % Total branded 3, % Silver % White & travel retail % Total unbranded % Total direct 3, % 3rd party % Total 3, % Total revenue increased by 40.4% driven by volume growth as well as a higher average selling price Revenue growth was distributed evenly between like-for-like salesin and network expansion Average Sales Price increase to DKK 145 driven by higher share of Rings and increased share of revenue from PANDORA owned stores (around 22% vs. 17% in Q4 2013) Revenue from concept stores generated 61.9% of revenue in Q4 2014, driven by increasing revenue and 310 new stores in

12 DEVELOPMENT IN OUR DISTRIBUTION NETWORK NUMBER OF STORES AND OPENINGS Number of stores Q NUMBER OF STORES, KEY NEW MARKETS End of 2014 Brazil Russia France Italy Q China Japan Share of total () Rest of Asia Total Net openings vs. Q Net openings Q Q vs. Q Concept stores 1,410 1,307 1, % Hereof PANDORA owned % Shop-in-shops 1,555 1,507 1, % Hereof PANDORA owned % 6 10 Gold 2,400 2,349 2, % Total branded 5,365 5,163 4, % Silver 2,744 2,761 3, % White and travel retail 1,797 1,917 2, % Total 9,906 9,841 10, % Concept stores Q branded points of sale opened in, including 103 concept store net openings Continued focus on global branded network with 564 branded points of sale opened since Q including: 310 concept stores 183 shop-in-shops 33 new O&O concept stores were added in, including 10 in Germany, 8 in France and 4 in Hong Kong Shop-in-shop Total

13 PRODUCT MIX Q PRODUCT MIX (DKKm) Growth Q4/Q4 Share of total FY 2014 FY 2013 PRODUCT SPLIT AS PERCENTAGE OF TOTAL REVENUE Growth Y/Y Share of total FY 2014 Charms 2,656 1, % 67.1% 7,933 6, % 66.5% Silver and gold charm bracelets % 11.7% 1,427 1, % 11.9% Rings % 9.0% 1, % 10.0% Other jewellery % 12.2% 1,390 1, % 11.6% Total 3,961 2, % 100.0% 11,942 9, % 100.0% 10.0% 11.9% FY % 66.5% FY 2013 Charms Silver and gold charm bracelets Rings Other jewellery 6.1% 12.8% 11.2% 69.9% Core categories continue the positive development Revenue from Rings increased 112.6% following the increased focus on the category across all regions Other Jewellery increased 64.4% driven by most subcategories Necklaces and Earrings increased around 50%, Other Bracelets up around 80% For 2014 Charms and Bracelets share of revenue decreased to 78.5%, as Rings capture an increasing share of revenue 13

14 GROSS MARGIN DEVELOPMENT IN GROSS PROFIT (DKKm) AND GROSS MARGIN (%) DKKm Q Q FY 2014 FY 2013 Revenue 3,961 2,845 2,822 11,942 9,010 Cost of sales 1, ,519 3,011 Gross profit 2,835 1,999 1,918 8,423 5,999 Gross margin 71.6% 70.3% 68.0% 70.5% 66.6% Gross margin up 3.6 percentage points vs. Q driven by: Lower commodity prices Higher share of revenue from PANDORA O&O stores Excluding hedging and inventory time lag, underlying gross margin would have been approximately 74% based on average gold and silver spot prices in Gross margin impact of 1pp if 10% change in commodity prices 14

15 OPEX DEVELOPMENT IN OPEX & MARGINS Q Q FY 2014 FY 2013 Gross profit Share of revenue 71.6% 70.3% 68.0% 70.5% 66.6% DKKm 2,835 1,999 1,918 8,423 5,999 Operational expenses Share of revenue 36.7% 36.4% 36.4% 36.4% 36.8% DKKm 1,454 1,036 1,027 4,351 3,318 Sales and distribution expenses Share of revenue 16.3% 15.5% 17.4% 16.4% 16.8% DKKm ,957 1,517 Marketing expenses Share of revenue 11.5% 9.1% 9.7% 9.6% 9.8% DKKm , Administrative expenses Share of revenue 8.9% 11.8% 9.3% 10.5% 10.2% DKKm , EBIT EBIT margin 34.9% 33.8% 31.6% 34.1% 29.8% Increase in sales and distribution expenses driven by higher revenue, an increase in owned and operated stores and investments in the e-commerce platform Marketing expenses were DKK 455 million corresponding to 11.5% of revenue compared to 9.7% in Q4 2013, driven targeted investments in more media activity across all regions Administrative expenses were DKK 354 million corresponding to 8.9% of revenue and impacted by: Increase in IT costs Increased headcount Depreciation and amortisation* EBITDA EBITDA margin 36.5% 35.9% 33.5% 36.0% 32.0% *Excluding gains/losses from sale of assets 15

16 REGIONAL EBITDA MARGINS Q EBITDA MARGINS vs. Q Q (% pts) (% pts) vs. Q FY 2014 FY 2013 Americas 35.8% 41.3% -5.5% 37.7% -1.9% 41.4% 42.6% Europe 44.5% 47.8% -3.3% 40.4% 4.1% 43.3% 36.1% Asia Pacific 53.3% 45.2% 8.1% 38.7% 14.6% 49.5% 37.8% Unallocated costs 1-6.0% -9.0% 3.0% -5.6% -0.4% -7.4% -7.4% Group EBITDA margin 36.5% 35.9% 0.6% 33.5% 3.0% 36.0% 32.0% All regional margins positively impacted by the improved gross margin Americas margin decrease 1.9 percentage points compared to Q impacted by: Brazil being moved from Other Europe to Other Americas (1pp) Short-term impact from acquisition of Hannoush stores (2pp) Higher marketing spend and investments into the Northeast US Asia Pacific significantly up compared to Q4 2013, driven by leverage on costs in new markets 1 Unallocated costs includes HQ costs, central marketing and administration cost in Thailand 16

17 PROFIT DEVELOPMENT IN FINANCIAL ITEMS, TAX AND NET PROFIT DKKm Q FY 2014 FY 2013 EBIT 1, ,072 2,681 Finance income Finance expenses Profit before tax 1, ,872 2,742 Income tax expenses Effective tax rate 20.0% 19.1% 20.0% 19.0% Net profit 1, ,098 2,220 Net finance costs amounted to net loss of DKK 122 million in DKK 29 million related to unrealised losses on intercompany loans in USD DKK 93 million was interest expenses and other costs, including loss on commodity and FX contracts. Net profit increased to DKK 1,007 million Effective tax rate 20.0% 17

18 WORKING CAPITAL DEVELOPMENT IN WORKING CAPITAL AND CASH MANAGEMENT DKKm Q Q Q Q Inventory 1,684 2,126 1,684 1,574 1,490 Trade receivables 1,110 1, Trade payables Operating working capital 1,990 2,695 1,843 1,850 1,846 Share of revenue % 24.9% 18.0% 19.3% 20.5% Other receivables Tax receivables Provisions Income tax payable Other payables Net working capital including derivatives Share of revenue 1 2.2% 8.5% 7.0% 6.4% 9.6% Derivatives Net working capital excluding derivatives 434 1, ,009 Share of revenue 1 3.6% 10.2% 7.1% 6.9% 11.2% Free cash flow 1, ,049 1,085 Cash conversion % 78.2% 82.6% 149.0% 146.8% NIBD/EBITDA ROIC % 54.6% 56.9% 52.4% 44.9% Operating working capital improved during the quarter and represented 16.7% of revenue at the end of, compared to 20.5% at the end of Q Inventories increased slightly due to increasing share of O&O stores Inventory at low levels - expected to increase as share of revenue going forward Trade receivables decreased compared to Q due to strong cash collection following Christmas Free cash flow increased to DKK 1,705 million compared to Q driven by: Higher EBITDA Favourable NWC movements 1 % of revenue in relation to last 12 months revenue. DKK 11,942m for the period ended 31 December Calculated as free cash flow / net profit 3 Calculated as last 12 months EBITDA 4 Calculated as last 12 months EBIT / Invested capital (at end of period) 18

19 FY 2014 IN SUMMARY SUMMARY Revenue increase 32.5% Continued roll out of stores with the addition of 310 new concept stores Gross margin was 70.5% EBITDA margin was 36.0% Free cash flow was DKK 3,868 million, corresponding to a cash conversion of 124.9% Proposed dividend increase 38% to DKK 9.0 per share Guidance for 2015 of more than DKK 14.0 billion with a EBITDA margin approx. 37% Share buyback programme of DKK 3,900 million, an increase of 63% compared to

20 FUTURE FRAMEWORK Enhance and broaden out our product platform Increase and constantly refresh the quality of our store network Develop a significant omni-channel business Build an infrastructure that supports our growth Create a scale business in Asia. 20

21 QUESTIONS AND ANSWERS 21